Wis. Admin. Code Department of Employee Trust Funds ETF 20.17

Current through October 28, 2024

Section ETF 20.17 - Service purchases

(1) GENERAL PROVISIONS.

(a)Scope. This section applies to service purchases under s. 40.285, Stats.

(b)Preparation of estimates; deadline for application.

1. Upon request, the department shall prepare a written estimate of the cost of purchasing service under s. 40.285(2), Stats., on an application form to be used for the purpose and send the application form to the participating employee. Anytime after the department receives a completed application and at least the minimum payment or authorization to transfer additional contributions required to accompany that application, the department may update and correct the calculation of the amount due as necessary, before finalizing the purchase of service credit.

2. Except as provided in subd. 3. the application to purchase creditable service, on the form approved by the department, must be actually received at the department on or before the date the applicant terminates all participating employment covered by the Wisconsin retirement system.

3. The deadline for a part-time elected official whose date of separation from the last participating employer is determined under s. 40.23(1) (am) 2, Stats., is the date the applicant terminated participating employment other than as a part-time elected official, or the date on which the applicant elected to waive further Wisconsin retirement system participation under s. 40.23(1) (am) 2, Stats., whichever date is later.

Note: The "Waiver of Part-Time Elected Service," form ET-4303, becomes effective on the day after its receipt by the department or, if more than one ET-4303 is being submitted, on the first day after the first waiver is received by the department.

(c)Rejection of application.

1. An application received after the deadline in par. (b) shall be rejected.

2. If the department determines that the participant is ineligible to purchase service for which the participant has applied, the application shall be rejected and any payment previously received by the department shall be refunded as provided in par. (f).

3. The department shall reject an application which is not accompanied by a payment in one of the following forms:

a. Payment in full of the department's estimated cost of the service credit if the purchase is for a qualifying period, teacher improvement leave or previously uncredited service as a junior teacher or executive official under s. 40.285(2) (c) to (f), Stats. Such payment may include authority to transfer 403(b) funds or additional contributions under s. 40.05(1) (a) 5, Stats., already held by the department in order to make the purchase. A transfer of 403(b) funds must be authorized by the school district or other educational institution employer operating the plan under section 403(b) of the internal revenue code.

b. In lieu of payment in full, the applicant may include at least 10% of the department's estimated cost of the creditable service with the application and arrange for the balance to be paid by a plan-to-plan transfer under s. 40.285(5), Stats. Such transfer funds must be received within 90 days after receipt of the application or the application or the purchase will be treated under the payment shortfall provisions of s. 40.285(5) (c), Stats., and par. (h).

c. Partial payment of the department's estimated cost of the service credit, but only if the purchase is for forfeited service or other governmental service, under s. 40.285(2) (a) or (b), Stats.

4. The department may reject any application which 90 days after the date of application remains incomplete in any respect other than receipt of payment. If an application is rejected under this subdivision then the department shall refund any associated payment as provided by par. (f).

5. An application to purchase creditable service for forfeited service or other governmental service under s. 40.285(2) (a) or (b), Stats., shall be rejected if the applicant does not have at least three continuous years of creditable service immediately preceding the date the completed application form is received by the department, with no break in service between the three continuous years and the application date.

(d)Effect of purchasing service. Buying creditable service under this section adds the amount of service purchased to the person's total creditable service for the purpose of calculating a formula annuity benefit under s. 40.23(2) (b) or (2m) (e), Stats., or making a formula annuity calculation in the same manner, including under s. 40.25(1), 40.63(8) or 40.73(1) (c), Stats. Buying creditable service has no retroactive effect, including but not limited to the following:

1. Buying creditable service does not undo any effects of the requirement that a person who takes a separation benefit must thereafter be treated as a new employee upon subsequent employment by a participating employer.

Note: See s. 40.25(3), Stats.

2. Buying creditable service does not establish an earlier date of participation nor restore an account as though it had never been closed.

3. Buying creditable service does not restore or entitle the purchaser to any benefits or rights associated with being a participant in the Wisconsin retirement system, or a member of any predecessor retirement system, at the time the services for which credit is being purchased were actually performed.

4. Buying creditable service does not establish creditable service in or for any particular annual earnings period or calendar year, or prior to any past date, or for purposes of measuring continuous years of creditable service.

Note 1: As a consequence of purchased service credits not establishing creditable service in or for any particular annual earnings period or calendar year, purchased service does not affect the denominator for the calculation of final average earnings in s. 40.02(33) (a) 2, Stats., nor the amount of a person's creditable service in a particular annual earnings period for purposes of s. 40.23(2m) (fm) or 40.63(1) (a), Stats., for example.

Note 2: Purchased service credit is included in the "creditable service" used to determine the normal retirement age and the maximum formula benefit for a protective occupation participant under ss. 40.02(42) (a) and 40.23(2m) (b), Stats., respectively, as well as months of creditable service for reducing the actuarial adjustment under s. 40.23(2m) (f) 2, Stats., and the reduction of duty disability benefits for service over 25 years under s. 40.65(5) (a), Stats. Credit purchased under s. 40.285, Stats., except under s. 40.285(2) (b), Stats., also applies to the "creditable service" used to determine eligibility for creditable military service, group health, and post-retirement life insurance, under ss. 40.02(15) (c), 40.02(25) (b) 6 a., 6e., 6m. b. and 6r. and 40.72 (4) (b), Stats. Limitations on the use of purchased credit for other governmental service in particular are listed in sub. (4) (e) 5.

Note 3: Service purchased under s. 40.285, Stats., shall be included with all other creditable service in the participant's account divided by a qualified domestic relations order pursuant to s. 40.08(1m) (b), Stats., provided the application for the purchase was actually received by the department prior to the decree date, as that term is defined by s. 40.02(18f), Stats. See s. ETF 20.35(3) (c).

Example 1. A person became a participating employee covered by the Wisconsin retirement system in 1995. The participant terminated employment in 1999 and took a separation benefit in 2000 thereby closing her Wisconsin retirement system account. She again became a participating employee on January 1, 2002, and later purchased all the service forfeited by taking the separation benefit in 2000. The years of service purchased are added to the participant's current service balance and are included in the creditable service used to calculate a formula annuity benefit under s. 40.23(2) (e), Stats. However, for all Wisconsin retirement system purposes she is treated as a new participant as of January 1, 2002. Her account and benefit rights are not restored as though her account had never been closed.

Example 2. A former member of the state teacher retirement system took a separation benefit in 1971. Subsequently buying creditable service for teaching services rendered in 1970 does not confer any present right to the minimum retirement age of 50 for teachers that was in effect in 1970.

Example 3. A former member of either the state or Milwaukee teacher retirement system before 1964 whose account was later closed by withdrawing member contributions as a member of either the combined or formula group, or by withdrawing both member and state deposits as a member of the separate group, does not reestablish that account by subsequently purchasing credit for the forfeited service. The former teacher is treated for all WRS purposes as a new employee upon returning to participating employment. Consequently, any benefits now paid to the participant are not being paid on the account of a December 31, 1963, member. However, nothing in this section shall be construed to prevent the Wisconsin department of revenue from interpreting s. 71.05(1) (a), Stats., as it sees fit for its purposes.

5. Buying credit for service does not affect or restore earnings for any annual earnings period or for purposes of calculating a benefit or final average earnings.

(e)Limitation on creditable service purchases.

1. A maximum of two purchases per calendar year may be made under each of subs. (3) through (8).

Note: The purchase of the service for the qualifying period, teacher improvement leave, and previously uncredited service as a junior teacher or executive participating employee are all intended to be one-time purchases of the entire available credit with payment-in-full accompanying the application. Applications without full payment would generally be rejected. However, because a plan-to-plan transfer under s. 40.285(5), Stats., is now an available payment option for all forms of creditable service purchase, the possibility exists that there will be a payment shortfall resulting in proration of the service purchased as provided by s. 40.285(5) (c), Stats. This paragraph permits an additional creditable service purchase of the same type during the same calendar year, provided the participating employee remains otherwise eligible.

2. A person may not purchase credit for service to the extent that the effect would be to exceed the 1.0 year limit on creditable service for any annual earnings period. For purposes of this subdivision, notwithstanding par. (d) 4., the service for which the person wishes to purchase credit and all the person's other purchased service credits shall be treated as if credited under the Wisconsin retirement system or a predecessor retirement system in the annual earnings periods when the services were actually rendered. The person's current creditable service for an annual earnings period together with all previously granted service credits associated with that annual earnings period, including but not limited to purchased service credits as provided in this subdivision, shall first be subtracted from 1.0 year to determine the balance remaining, if any, for each annual earnings period that may be purchased under this section and s. 40.285, Stats.

Example 1. A participant earned 0.40 years of creditable service working for a participating employer during the 2004 annual earnings period. During the same annual earnings period, the participant worked 1,905 hours, the equivalent of one full year of creditable service, for another governmental employer not covered by the Wisconsin retirement system. Even if the participant is otherwise eligible to purchase credit for the other governmental service, no more than 0.60 years of service for the 2004 annual earnings period may be purchased.

Example 2. A participant whose annual earnings periods are calendar years, earned 0.60 years of creditable service between January and May 2005 by working overtime. The participant then terminated and took a separation benefit, forfeiting the service. The participant then returned to participating employment in July and earned 0.58 years of creditable service for the remainder of 2005. Some years later, the participant meets the qualifications to purchase the forfeited service. The participant may not purchase credit for more than 0.42 years of the forfeited service.

(f)Refunds. Refunds may not be made for amounts under the threshold established by s. 40.285(7), Stats. Refunds shall be made in the manner provided by s. 40.285(6), Stats. Interest on refunds is subject to the provisions of s. 40.08(6), Stats. No excess funds transferred to the department by a plan-to-plan transfer may be refunded directly to the participant. If the department refunds any payment taken from additional contributions under subd. 2. or 3., it shall restore the refunded amount to the additional account as if the transfer had not occurred. The following order of priority shall determine the sources of any refund due:

1. The participant's lump sum payment to the department. The refunded amount shall be paid directly to the participant.

2. Additional contributions transferred from the participant's after-tax additional contribution account. The amount refunded shall be transferred back to the participant's after-tax additional account.

3. Additional contributions transferred from the participant's tax sheltered additional contribution account. The amount refunded shall be transferred back to the participant's tax-sheltered additional account.

4. Funds transferred from another qualified retirement plan under s. 40.285(5), Stats. When more than one qualified retirement plan was the source of transferred funds, the department shall determine the refunded amount to be returned to each qualified retirement plan.

(g)Treatment of payments.

1. Payments retained by the department shall be deposited in the participant's required contribution account under s. 40.04(4) (a) 1, Stats. Except as otherwise provided in subd. 3., if the participant participates in the variable trust the payment shall be divided between the core and variable accounts in the same proportion as the participant's current contributions are so divided at the time that payment is received.

2. For interest crediting purposes, except as otherwise provided in subd. 3., all payments received to purchase creditable service including plan-to-plan transfer funds shall be treated as amounts received during the year in which the department actually receives the payment or transferred funds.

3. Notwithstanding subd. 2., for interest crediting purposes, funds transferred from the participant's voluntary employee additional contributions that were in the prior year's closing balance of the additional contribution account, including interest credited, when the transfer occurs shall retain that status so that the participant will not forfeit interest to be credited on the prior year's closing balance. Notwithstanding subd. 1., amounts transferred from a participant's additional contributions in the core investment fund to buy service shall remain in the core investment fund, and additional contributions transferred from the participant's variable additional contributions to buy service shall remain in the variable fund. Nothing in this subdivision shall be construed to affect an individual's variable cancellation rights under s. ETF 10.30(5).

(h)Payment shortfalls.

1. For any type of creditable service purchased under s. 40.285(2), Stats., if the purchase includes a plan-to-plan transfer and the total amount received by the department is less that amount required for the purchase of the service, and the difference exceeds the threshold for corrections under s. 40.285(7), Stats., then the department shall proceed under s. 40.285(5) (c), Stats., and allow the participant 30 days to pay the difference. If the difference is not received within 30 days after notice is sent to the participant, the department shall complete the purchase, reducing the amount of service credit purchased to the credit that can be purchased by the payment actually received.

Note: See s. ETF 20.17(3) (d) for the required rules concerning how a forfeited service purchase is prorated when the participant forfeited service under more than one category of employment.

2. If the department determines that the actual cost of purchasing service under s. 40.285(2), Stats., is greater than the amount estimated by the department for the participant, and the participant paid the estimated amount in full, then the participant shall be notified and allowed 30 days to either pay the balance due or withdraw the application, without prejudice. If the balance due or is not received prior to the deadline, then the department shall proceed under subd. 2. a., b., c. or d., as appropriate.

a. When a plan-to-plan transfer made up part of the payment, the department shall proceed under the payment shortfall provisions of s. 40.285(5) (c), Stats., except as otherwise provided by subd. 2. c. or d.

b. When no plan-to-plan transfer is involved and subd. 2. c. or d. do not apply, or the participant made a timely request to withdraw the application, the department shall refund all amounts received as provided in par. (f).

c. If a Wisconsin retirement system annuity or lump sum in lieu of an annuity under s. 40.25(1), Stats., is to be paid to the applicant, and the applicant so requests, the balance due shall be deducted from the lump sum or a subsequent monthly annuity payment payable. This subdivision paragraph does not apply if the balance due exceeds the amount of the benefit under s. 40.25(1), Stats., or if the Department determines that the amount of the monthly annuity available for this deduction is insufficient.

d. If the application was for the purchase of credit for forfeited service or other governmental service, and subdivision paragraph c. does not apply, the department may complete a partial purchase as provided in sub. (3) (d) or (4) (g), respectively.

(i)No participant withdrawal or cancellation of application; exception. T he participant may not cancel or withdraw an application to purchase service credits once any payment has been received by the department, except under the circumstances specified in par. (h) 2. b.

(j)Treatment of purchased service credit as pre-2000 or post-1999 service. For purposes of computing formula annuity benefits under s. 40.23(2m) (e), Stats., and the differing multipliers applicable to creditable service that was performed before January 1, 2000, and on and after that date, purchased service credits will be treated as provided in s. ETF 20.19(2).

(2) DEFINITIONS. Words, phrases and terms used in this section shall have the same meanings as set forth in s. 40.02, Stats., and s. ETF 10.01. In addition, in this section:

(b) "Current earnings" means the participant's earnings in the most recent complete annual earnings period, provided the participant was a participating employee for the full annual earnings period. If the participant was not a participating employee throughout the most recently ended annual earnings period, "current earnings" means the product of the participant's hourly pay rate on the date of application, multiplied by the number of hours the participant would reasonably be expected to be employed as a participating employee during the current annual earnings period, assuming that the participant would continue to be employed for the remainder of the current annual earnings period.

(c) "Date of application" means the date the signed application on the form approved by the department for the purchase of the type of service in question is received by the department, as determined under s. ETF 10.82(1).

Note: The forms approved by the department for the purchase of service credits are "Application to Purchase Other Governmental Service," form ET-2205, "Qualifying Service Purchase Estimate/Application," form ET-4314, "Forfeited Service Purchase Estimate/Application" form ET-4315, "Uncredited Teaching Service Purchase Estimate/Application," form ET-4323. These are individually customized forms that reflect the department's estimate of the amount required from the participant for that particular purchase. In addition, where no standard form exists for the type of service purchase, customized estimates will be prepared by the department upon request. All forms and estimates can be obtained at no charge by writing to: department of employee trust funds, P.O. Box 7931, Madison, WI 53707-7931, or by calling (608) 266-3285 or toll free at (877) 533-5020. Forms should be requested at least four (4) weeks before the date the participating employee intends to apply, and well in advance of any anticipated termination of employment, to allow sufficient time for the department to calculate the personalized estimates of the cost.

(e) "Money purchase balance" means the sum of the participant's employee required contributions and accrued interest, including accumulations resulting from purchases under this section, plus an amount from the employer reserve equal to the employee required accumulation less any amount resulting from purchases under s. 40.285(2) (b), Stats., and interest accumulated on those amounts.

(f) "Other governmental service" means one of the following:

1. Service performed as an employee of any of the following:

a. The federal government.

b. The government of a U.S. state other than Wisconsin or a political subdivision, department or agency of such state.

c. An employer as defined by s. 40.02(28), Stats., that does not participate in the Wisconsin retirement system with respect to the employee's employment category.

2. Service as an employee for a participating employer in the Wisconsin retirement system that was performed before the employer began to participate with respect to the employee's employment category, and that has not been recognized by the employer as creditable prior service.

Note: Under s. 40.21(6), Stats., an employer may choose to recognize none, 25%, 50%, 75% or 100% of the previous service of existing employees when the employer first joins the Wisconsin retirement system, and may subsequently increase the recognized percentage for those who are still participating employees at the time. Any percentage of an employee's previous service remaining unrecognized is "other governmental service" within the meaning of subd. 2.

(3) PURCHASING CREDITABLE SERVICE FORFEITED BY A SEPARATION BENEFIT OR WITHDRAWAL OF EMPLOYEE OR MEMBER CONTRIBUTIONS.

(a)Scope. This subsection applies to purchases of service under s. 40.285(2) (a), Stats.

(am)Eligibility criteria.

1. An applicant is eligible to purchase service under this subsection if, on the date of application, the applicant is a participating employee with at least 3 continuous years of creditable service, as defined by s. ETF 10.01(7) and no break in service between the three continuous years and the application date.

2. For purposes of s. 40.285(2) (a) 2 b., Stats., unless barred because of receipt of a benefit as provided in subd. 3. or as otherwise provided in this section or s. 40.285, Stats., a person may purchase credit for rendering services that were then covered by the state teacher retirement system, Milwaukee teacher retirement fund or Wisconsin retirement fund, if the person subsequently received a lump sum payment under one of the separation or withdrawal laws in effect before January 1, 1982, including ss. 41.16, 1969-79 stats., 42.242 (5), 42.243 (7) (e), 1957-79 stats., 42.245 (4), 1965-79 stats., 42.49 (1) (a), 1945-79 stats., 42.49 (14), 1955-79 stats., 42.49 (16), 1965-79 stats., 42.75 (1), 42.76 (10), 42.78 (6), 1971-75 stats., 42.86 (1) and (2) and 42.91, 1969-79 stats., 66.90 (15), 1945 stats., 66.91, 1947-67 stats.

3. Conversely, a person who received an annuity, or a lump sum payment in lieu of an annuity under s. 40.25(1), Stats., is not eligible to purchase credit under s. 40.285(2) (a), Stats., for any services rendered to a participating employer as a participating employee prior to payment of the benefit. Correspondingly, no person may purchase credit under s. 40.285(2) (a), Stats., for services rendered prior to receiving a lump sum benefit under the similar laws in effect for the Wisconsin retirement fund, state teacher retirement system or Milwaukee teacher retirement fund prior to January 1, 1982, including ss. 41.11, (11), 1969 stats., 41.11 (8) or (10), 1971-79 stats., 42.242 (7), 1957-79 stats., 42.245 (6), 1965-79 stats., 42.49 (15), 1955-79 stats., 42.73 (1) and 42.76 (12) (c), 1971-79 stats., 42.78 (2) (k) 1. or 2., 1975-79 stats., and 66.906 (3d), 1967 stats. Those are not separation or withdrawal benefit laws within the meaning of s. 40.285(2) (a) 2 b., Stats.

(b)Service in different categories of employment; Calculation of cost. In cases where the service to be reestablished was earned in more than one employment category, separate calculations shall be done for each period of service using the applicable statutory contribution rate under s. 40.05(1) (a), Stats., as affected by s. 40.05(1) (b), Stats., for each employment category. The department's estimate to purchase service shall be calculated based on all the years and fractions of a year of forfeited service that are then available for purchase under s. 40.285(2) (a), Stats., and this subsection, including the limits of s. 40.285(2) (a) 1 a. and b., Stats., unless the applicant specifies a lesser amount. If the applicant so requests on the application received by the department, the final calculation of cost made after the application is received may include all years and fractions of a year of forfeited service eligible for purchase under s. 40.285(2) (a), Stats., as of the date of application.

(d)Proration of multiple category service for payment shortfall. If the participant's payment to purchase service forfeited by a separation benefit or withdrawal of employee or member contributions is less than the amount needed to purchase all of the forfeited service that the participant is eligible to buy, the department shall complete the purchase by reducing the service credit purchased to the prorated credit that can be purchased by the payment actually received. Within each category of employment, the payment received shall be applied first to purchase service credit eligible to be treated as pre-2000 service, as provided in s. ETF 20.19(2) (d). If the participant has forfeited service based on employment in more than one category under s. 40.23(2) (b), Stats., and the participant does not specify the service category or categories to which the payment is to be applied, the department shall use the following order of priority in determining to which category of service to apply the payment, until the amount paid is exhausted:

1. Service as a protective occupation participant not subject to the federal Social Security Act, as described in s. 40.23(2m) (e) 4, Stats.

2. Service as a protective occupation participant subject to the federal Social Security Act as described in s. 40.23(2m) (e) 3, Stats.

3. Service as an elected official, as described in s. 40.23(2m) (e) 2, Stats.

4. Service as an executive participating employee, as described in s. 40.23(2m) (e) 2, Stats.

5. Service described in s. 40.23(2m) (e) 1, Stats., as a teacher, as that term is as defined in s. 40.02(55), Stats.

6. Service as a general category employee as described in s. 40.23(2m) (e) 1, Stats., excluding service as a teacher.

(4) PURCHASE AND CREDITING OF OTHER GOVERNMENTAL SERVICE.

(a)Scope . This subsection applies to creditable service purchases under s. 40.285(2) (b), Stats.

(b)Eligibility criteria. The department shall grant creditable service for other governmental service to participants who meet all of the following requirements:

1. On the date of application, the applicant is a participating employee with at least 3 continuous years of creditable service, as defined by s. ETF 10.01(7), with no break in service between the three continuous years and the application date.

2. With respect to the other governmental service for which credit is to be purchased, the participant was the employee of a federal, state or local governmental entity. In this paragraph, notwithstanding s. 40.02(26) and (28), Stats., the terms "employee" and "employer" have their common meanings. The term "employee" does not include an unpaid volunteer, an independent contractor, a person contracted to furnish more than his or her personal services, a patient or inmate of a hospital, home or institution who performs services therein, or anyone who did not receive salary, wages or other compensation for his or her services. Employment by a private or non-profit entity which received government moneys or which was under contract to provide services to or on behalf of a governmental entity does not constitute employment with a governmental entity.

3. The participant submits an application to the department with payment, on a form approved by the department. The applicant shall then have 90 days to complete the application process by submitting all of the following:

a. Evidence that the service was other governmental service and which meets the requirements of par. (c). The department's determination as to the sufficiency of the documentation shall be subject to timely appeal to the employee trust funds board under ch. ETF 11.

b. A written certification by the employer for which the service was rendered that the service will not be used to establish entitlement to, or the amount of, any other pension or retirement benefit from a plan for federal, state or local government employees which is subject to sections 401 or 403 of the internal revenue code, except for a disability or OASDHI benefit or a benefit paid for service in the national guard and the reserves. If the participant is unable to obtain the employer's certification through reasonable efforts, the department may accept the employee's written statement in lieu of the employer's certification, or contact the employer directly. If the employer does not have the information necessary to make this certification, the department may accept the employee's written statement in lieu of the employer's certification.

Note: If the federal, state or local governmental retirement or pension plan, like the Wisconsin retirement system, provides a benefit defined in part by service but also includes an alternative money-purchase benefit, then service under that plan is used to establish entitlement even if the particular individual received a benefit calculated without reference to years of service. The same is true for any plan with a vesting requirement.

(c)Required evidence of service. A participant who proposes to purchase other governmental service shall provide to the department all of the following:

1. The correct name and current or latest address, and telephone number, if any, of the employer for which the service was rendered.

2. The dates of service for the other governmental employer, including the beginning and ending dates of each period of employment.

3. Evidence of whether the employment was considered full-time or part-time, and of the number of hours worked in each calendar year, sufficient to establish the amount of service which the participant is eligible to purchase. Full-time employment will be assumed to be 8 hours per day and 40 hours per week, absent a showing that the employer established a different standard. Years of service shall be calculated from hours of service rendered in the manner provided in s. ETF 10.03(3).

4. Evidence that the employer was a federal, state, or local governmental entity in the United States. The department may rely on the determination of the social security administration as to whether an employer is a governmental entity.

5. Evidence that the participant was an employee of the governmental entity.

6. Evidence that:

a. For service that was performed before July 1, 2011, the service met the participation standard under s. ETF 20.015(1).

b. For service that was performed on or after July 1, 2011, the service met the participation standard under s. ETF 20.015(2).

7. Evidence that all of the following are true:

a. The service was not performed as an independent contractor or subject to a contract under which the employee furnished more than his or her personal services.

b. That the services were not performed as a student assistant, or as an employee-in-training or for a school or other educational institution where the employee was a student attending classes and performing services incidental to the course of study.

c. The services were not performed on or after April 23, 1992, while the person was a full-time student who had not attained age 20.

d. The services were not performed after the person had already become an annuitant, excluding annuities received in the capacity of another person's beneficiary, named survivor or alternate payee.

e. The services were not performed for a hospital, home or institution while the person was a patient or inmate.

f. The employer was not a private or non-profit entity under a contract to provide services to or on behalf of a governmental entity.

8. If the participating employee is applying to receive creditable service for service in the U.S. armed forces or national guard, evidence that the employee was discharged from the U.S. armed forces or national guard under honorable or general conditions.

(d)Cost to purchase other governmental service.

1. The cost to purchase other governmental service is intended to fully fund the anticipated benefit increase provided by the purchased service credit, based on the laws then in effect.

2. The actuary shall devise the method for calculating the cost to purchase other governmental service. The actuary's calculation shall use the same economic and actuarial assumptions used in the actuary's valuations of the Wisconsin retirement system. The actuary shall establish the factors necessary to determine the actuarial value to each applicant of the purchased service credit. Those factors may include, without limitation:

a. The participant's current employment category as determined under s. 40.23(2m) (e), Stats. If the participant is employed in 2 or more categories on the date of application, the computation shall be based on the current employment category in which the participant has accrued the most creditable service.

b. The participant's earnings for the last completed annual earnings period, as of January 1 preceding the date of application.

c. The number of years, in hundredths of a year, of service credit the participant requests to purchase.

d. The participant's date of birth.

e. The participant's accumulated employee required contributions, including interest, as of the January 1 preceding the date of application.

f. Twelve times the participant's final average earnings determined as of January 1 preceding the date of application.

g. The participant's years of creditable service, including all previously purchased service credit, by employment category and by pre-2000 and post-1999 service.

Note: This amendment (CR 09-057) to the existing rule provides clarification that the actuary may include the eight factors specified in the rule when determining the actuarial value of the purchased service credit along with other relevant factors. In addition, the rule corrects a typo by adding the word "service" to the applicable section.

h. The participant's variable excess or deficiency balance under s. 40.23(2m) (c), Stats., as of January 1 preceding the date of application.

3. The actuary may, at any time, change the method of calculating the cost of other governmental service credits if warranted by changes in the benefit laws or valuation assumptions of the Wisconsin retirement system or by other factors the actuary determines to be actuarially significant. The actuary's new method of calculation shall be applied as soon as possible unless a delayed effective date is recommended by the actuary. The department may complete pending transactions and honor cost estimates produced before the new method of calculation went into effect.

(e)Creditable service based on purchase of other governmental service; limitations.

1. The amount of other governmental service purchased through all purchases made under this section may not exceed the amount of the participant's creditable service earned under the Wisconsin retirement system and credited as of the date of the last application to purchase other governmental service, excluding any service previously purchased by the participant.

2. Other governmental service shall be credited in the general employment category regardless of the employee's current employment category or the nature of the service, and benefits based on the purchased service shall be calculated under s. 40.23(2m) (e) 1, Stats.

3. Service, including teaching service, shall be granted in hundredths of a year, at the rate of one year for 1,904 hours or more worked in one calendar year. If the participant worked less than 1,904 hours in a calendar year, the partial year of other governmental service shall be calculated by dividing the number of hours worked by 1,904.

4. A participant's total creditable service in any annual earnings period from all sources may not exceed one year.

5. Creditable service purchased under this section shall be used solely to calculate a formula annuity benefit amount based upon years of creditable service, as under ss. 40.23(2) (b) or (2m) (e), 40.25(1), 40.63(8), and 40.73(1) (c), Stats. The department may not consider purchased other governmental service for any other purpose, including but not limited to determining:

b. Whether the participant has met the service requirements for disability benefits under s. 40.63(1) (a) or (4), Stats.

c. Whether the participant has met the service requirements to continue insurance after termination of employment under s. 40.02(25) (b) 6 a., 6e., 6m. b., 6r., or 40.72 (4) (b), Stats.

d. The amount of creditable service which the participant is eligible to reestablish under s. 40.285(2) (a), Stats., or to purchase under this subsection.

e. The amount of creditable military service for which the participant is eligible under s. 40.02(15) (c), Stats.

f. Notwithstanding sub. (1)(g) 1., if any service for a Wisconsin employer which has been credited under this section is subsequently recognized as creditable prior service under s. 40.21(6), Stats., the participant's creditable service for other governmental service shall be reduced accordingly and the associated contributions plus the interest credited to those contributions shall be transferred to the employee's additional account and shall be available to the employee in the same manner as other contributions under s. 40.05(1) (a) 5, Stats. No other refund to the employee may be made.

(f)Payments received to purchase other governmental service; limitations on benefits. The department shall account for amounts received to purchase other governmental service, and the interest credited to such in a manner that permits identifying and subtracting such funds from amounts to be increased by a matching amount from the employer reserve when computing a money purchase annuity or a death benefit, as provided by ss. 40.23(3) and 40.73(1) (am), Stats., and for purposes of calculating the hypothetical annuity under s. 40.73(1) (c), Stats.

(g)Payment shortfall. If the participant does not withdraw the application or pay the balance due on a payment shortfall within 30 days after notice is sent to the participant, the department shall complete the purchase, either by deducting the amount due from the participant's annuity, if any, as provided in sub. (1)(h) or by reducing the amount of service credit purchased to the credit that can be purchased by the payment actually received.

(5) CREDIT FOR SERVICE DURING QUALIFYING PERIOD.

(a)Scope. This subsection applies to purchases of service under s. 40.285(2) (d), Stats.

(b)Calculation of amount due. The department's estimate to purchase service shall be calculated based on the fraction of a year of qualifying service that is available for purchase under s. 40.285(2) (d), Stats., and this subsection. The payment to purchase qualifying service as provided in s. 40.285(2) (d), Stats., shall be based on the applicant's highest earnings in a single annual earnings period as of the date of application. The earnings shall be annualized prior to calculating the amount due from an applicant who earned less than a full year of service in the highest annual earnings period as defined in s. 40.02(3), Stats.

Example 1. Calendar year 2005 was the applicant's highest annual earnings period on the date her application to purchase service is received. During 2005, the applicant had 0.75 years of creditable service and $27,000 in earnings. The earnings will be "annualized" to $36,000 (i.e., $27,000 divided by 0.75) and that amount will be used for purposes of calculating the payment due.

Example 2. An applicant whose annual earnings periods are calendar years had $34,000 in earnings and 1.0 years of creditable service in 2004, the highest earnings reported for any calendar year as of the date of application. The applicant also had $27,000 in earnings but only 0.75 years of creditable service in 2005. For purposes of calculating the payment due, the actual earnings for 2004 will be used because that is the highest earnings year, and the department will not annualize the lower 2005 earnings to $36,000.

(c)Requirement to first purchase forfeited service. If a participating employee has previously received a separation benefit or withdrawal of member contributions after serving a qualifying period, the participant may purchase credit for a qualifying period only if the participant has first reestablished the maximum possible years of forfeited creditable service under s. 40.285(2), Stats., that the participant is eligible to buy as of the date that the department receives the application to buy qualifying service.

(d)Employment category to be credited. The qualifying period of service shall be credited to the employment category in which the service would be credited if the qualifying service had been creditable at the time it was performed.

(6) PURCHASE OF SERVICE FOR TEACHER IMPROVEMENT LEAVE.

(a)Scope. This subsection applies to purchase of creditable service under s. 40.285(2) (e), Stats.

(b)Eligibility; Board of Regents certification. In addition to the other requirements of sub. (1) for applying, the applicant is responsible for first applying to the Board of Regents as required by s. 40.285(2) (e) 1, Stats., and obtaining the certification of the period of compensated teacher improvement leave occurring between January 1, 1964, and August 31, 1967. The Board of Regents certification must be submitted to the department in order to obtain the application form to apply to purchase credit for the service.

Note: The form "Uncredited Teaching Service Purchase Estimate/Application," form ET-4323 can be obtained at no charge by writing to: department of employee trust funds, P.O. Box 7931, Madison, WI 53707-7931, or by calling (608) 266-3285 or toll free at (877) 533-5020.

(c)Calculation of amount due. The department's estimate to purchase service shall be calculated based on all the years and fractions of a year of teacher improvement leave that are identified in the Board of Regents' certification and are available for purchase under s. 40.285(2) (e), Stats., and this subsection.

(7) PURCHASE OF PREVIOUSLY UNCREDITED SERVICE AS A JUNIOR TEACHER.

(a)Scope. This subsection applies to purchase of creditable service under s. 40.285(2) (f), Stats.

(b)Eligibility. Purchase of service under this subsection is available only to participating employees who were both:

1. Engaged as a principal occupation in teaching in the public schools, state colleges or university of the state or any political subdivision of the state, excluding the city of Milwaukee.

2. So employed during any part of a school year prior to the 1957-58 school year, when the teacher's 25 th birthday had not occurred by the July 1 immediately preceding the beginning of the school year.

(c)Calculation of amount due. The department's estimate to purchase service shall be calculated based on all the years and fractions of a year of junior teaching service that are available for purchase under s. 40.285(2) (f), Stats., and this subsection.

(8) PURCHASE OF PREVIOUSLY UNCREDITED SERVICE AS AN EXECUTIVE OFFICIAL.

(a)Scope. This subsection applies to purchases of previously uncredited service as an executive official under s. 40.285(2) (c), Stats.

(b)Eligibility. Except as provided in par. (c), any current participating employee who, on or after May 3, 1988, was an executive participating employee as defined by s. 40.02(30), Stats., may purchase credit under s. 40.285(2) (c), Stats., for service previously uncredited due to any statutory age restriction for persons over age 62, provided the participating employee also meets the criteria of subd. 1. or 2. or both.

1. Was born before January 1, 1920, and who at any time from July 1, 1974 through September 30, 1981, held a position listed in s. 20.923(4), (8) or (9), Stats., during the time of employment.

Note: Section 20.926(1) (a), Stats., as in effect from July 1, 1974, through December 31, 1981, excluded credit for service in such position rendered after the end of the calendar quarter in which the person attained age 62.

2. Was born before February 1, 1926, and who at any time from October 1, 1981, through January 31, 1988, held a position listed in s. 20.923(4), (8) or (9), Stats., during the time of employment.

Note 1: Section 40.02(17) (c), Stats., as in effect from January 1, 1982, until May 3, 1988, barred creditable service for persons in such positions after the first day of the fourth month commencing after attaining the age of 62.

Note 2: The referenced positions listed in s. 20.923(4), (8) and (9), Stats., include the president of the university of Wisconsin system, which was so listed in s. 20.923(4) (j) 1, Stats., effective from August 4, 1973, and at all times material to s. 40.285(2) (c), Stats.

(c)Exclusion from eligibility. No person who purchased creditable service under s. 40.02(17) (e), Stats., as in effect from May 3, 1988, until July 26, 2003, is eligible to purchase creditable service under s. 40.285(2) (c), Stats.

(d)Calculation of amount due. The department's estimate shall be calculated based on all the years and fractions of a year of previously uncredited service that are available for purchase under s. 40.285(2) (c), Stats., and this subsection. All participating employees purchasing service under s. 40.285(2) (c), Stats., shall pay the same rate for such service, as prescribed by that statute, regardless of whether the participating employee is a present or former elected official or an appointee of such an official.

(e)No retroactive effect on prior payment. No present or former elected official, or an appointee of such an official, who purchased service under former s. 40.02(17) (e), Stats., as in effect from May 3, 1988 through August 14, 1991, shall be entitled to any refund or additional benefit based upon the amendment of s. 40.02(17) (e), 1989 stats., by 1991 Wisconsin act 39 or the renumbering and subsequent amendment of s. 40.02(17) (e), Stats., by 2003 Wisconsin act 33.

Wis. Admin. Code Department of Employee Trust Funds ETF 20.17

CR 07-062: cr. Register June 2008 No. 630, eff. 7-1-08; CR 09-057: am. (4) (d) 2. (intro.) and g. Register May 2010 No. 653, eff. 6-1-10; correction in (1) (c) 3. a. made under s. 13.92(4) (b) 7, Stats., Register August 2013 No. 692, eff. 9-1-13; correction in (3) (b) made under s. 13.92(4) (b) 7, Stats., Register October 2013 No. 694, eff. 11-1-13.

Amended by, CR 14-055: r. (2) (d), am. (2) (f) 1. (intro.), (4) (b) 3. b., r. and recr. (4) (c) 6., am. (4) (c) 7. (intro.), a., e., cr. (4) (c) 8. Register May 2015 No. 713, eff.6/1/2015

Amended by, 2015 Wis. Act 330 s. 20: am. (6) (b), (c) Register April 2016 No. 724, eff.5/1/2016

Amended by, CR 19-126: am. (1) (b) 2., (d) 4., (4) (b) 3. b., (e) 5. b. Register May 2021 No. 785, eff.6/1/2021